Sustainable Supply Chains and the Future of Procurement

Sep 9, 2021 | Future of procurement

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Sep 9, 20213 min read

Procurement drives aid sustainable supply chains by selecting suppliers based on ESG values, negotiating contracts for sustainable practices, promoting transparency and traceability, collaborating with suppliers, and driving innovation. Companies must ensure procurement aligns with their sustainability goals, is cost-efficient, and considers social and economic impacts.

In today’s business world, major corporations are focusing on their impact on the planet, and many are turning towards procurement drives to promote sustainability in their supply chain management. A procurement drive helps companies identify, evaluate, and source materials and services while actively promoting social and environmental responsibility. The process of implementing these drives requires comprehensive understanding and rigorous evaluation of supply chain components. 

How Procurement Drive Is Aiding Sustainable Supply Chain 

Here are some detailed examples of how procurement can drive change towards sustainability in the supply chain: 

  • Supplier Selection: Procurement can choose suppliers that have demonstrated a commitment to sustainability through certifications, reporting, and other indicators. For example, a company might prioritize suppliers with certifications such as B Corp, Fair Trade, or Forest Stewardship Council (FSC) that demonstrate responsible practices in areas such as labor rights, environmental protection, and responsible sourcing of materials. 
  • Contract Negotiation: Procurement can negotiate contracts that include sustainability-related clauses and incentives, such as requirements for renewable energy use, waste reduction, or greenhouse gas emissions reductions. This helps to create a shared understanding of sustainability expectations and holds suppliers accountable for meeting these expectations. 
  • Transparency and Traceability: Procurement can promote transparency and traceability in the supply chain by requiring suppliers to disclose information about their ESG practices and the origin of materials. This helps to ensure that products are ethically sourced and produced and helps to build trust with customers and stakeholders. 
  • Collaboration and Partnership: Procurement can collaborate with suppliers to identify areas for improvement and drive change together. For example, a company might work with suppliers to implement sustainability initiatives, such as reducing greenhouse gas emissions, conserving water, or improving waste management practices. 
  • Innovation and New Technologies: Procurement can drive innovation and the adoption of new technologies that support sustainability. For example, a company might work with suppliers to develop new products made from recycled materials, or to implement digital solutions that increase supply chain efficiency and reduce waste. 

How Companies Are Leveraging Procurement Drive to Promote Sustainability 

Companies are leveraging procurement drive initiatives by amalgamating sustainability in the core areas of demand forecasting, transportation, dispersion, and backend operations. This enables the company to prioritize environmental policies more than ever before. In addition, global companies are maintaining a plethora of certifications, such as IS014001, IS014012, and OHSAS 18001 to back their sustainability efforts. 

Many companies have implemented a three-step process when engaging in procurement drives - define target criteria for suppliers, grade potential suppliers based on their qualification for sustainable standards and assess their compliance (including the end-product inspection) with these criteria. Additionally, using Total Cost of Ownership (TCO) has enabled buyers to cut indirect costs associated with prolonged supply time and reduced manpower. 

What Companies Need To Know About Procurement Drive For Sustainable Supply Chains 

Companies investing in drives towards sustainable supply chains need to understand that the process should be both cost-efficient and adaptable across multiple industries. This should include specialized research, cost-efficient implementation of protocols, back-office level training and verification of standards adopted at each level. Companies investing in this model should also pay attention to how their suppliers adjust the standards released by them. 

In addition, companies should ensure that their procurement drive is in line with their overall sustainability goals. This means that the procurement process should be designed to reduce the environmental impact of the supply chain, while also ensuring that the products and services procured are of the highest quality. Companies should also consider the social and economic impacts of their procurement drive, and ensure that their suppliers are compliant with relevant labor and environmental regulations. 

In conclusion, sustainable supply chains are becoming increasingly important in today's business environment, as customers and stakeholders demand socially responsible products, and as regulations and policies shift towards sustainability. Procurement plays a crucial role in driving change towards sustainability by selecting suppliers that align with ESG values, negotiating contracts that encourage sustainable practices, promoting transparency and traceability, collaborating with suppliers, and driving innovation. 

FactWise Source-to-Pay empowers procurement organizations to prioritize preferred vendors via RfX events and direct POs, discover new, pre-vetted, well-rated vendors that meet their quality and ESG requirements, and to define their item specifications and logistics/delivery requirements in detail on POs. At FactWise, we are committed to transforming the procurement journey and generating win-win solutions for buyers and suppliers globally. 

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


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